The strategy of international business

Tài liệu này dành cho sinh viên, giảng viên viên khối ngành tài chính ngân hàng tham khảo và học tập để có những bài học bổ ích hơn, bổ trợ cho việc tìm kiếm tài liệu, giáo án, giáo trình, bài giảng các môn học khối ngành tài chính ngân hàng

International

by Charles W.L Hill

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,

Inc All rights reserved.

Chapter 12

The Strategy of International

Business

Introduction

What actions can managers take to compete more

effectively as an international business?

How can firms increase profits through international

expansion?

What international strategy should firms pursue?

Strategy And The Firm

A firm’s strategy refers to the actions that managers take

to attain the goals of the firm

makes on its invested capital

over time

Expanding internationally can boost profitability and profit growth

Strategy And The Firm

Figure 12.1: Determinants of Enterprise Value

Value Creation

difference between V (the price that the firm can charge for that product given competitive pressures) and C (the costs

of producing that product)

The higher the value customers place on a firm’s

products, the higher the price the firm can charge for those products, and the greater the profitability of the firm

Value Creation

Figure 12.2: Value Creation

Classroom Performance System

What is the rate of return the firm makes on its invested

Value Creation

Profits can be increased by:

adding value to a product so that customers are willing to pay more for it – a differentiation strategy

lowering costs – a low cost strategy

Michael Porter argues that superior profitability goes to

firms that create superior value by lowering the cost

structure of the business and/or differentiating the product

so that a premium price can be charged

Strategic Positioning

Michael Porter argues that firms need to choose either

differentiation or low cost, and then configure internal

operations to support the choice

To maximize long run return on invested capital, firms

must:

pick a viable position on the efficiency frontier

configure internal operations to support that position

have the right organization structure in place to execute

the strategy

Strategic Positioning

Figure 12.3: Strategic Choice in the International Hotel

Industry

Operations: The Firm As A Value Chain

A firm’s operations can be thought of a value chain

composed of a series of distinct value creation activities,

including production, marketing, materials management,

R&D, human resources, information systems, and the firm

infrastructure

Value creation activities can be categorized as primary

service) and support activities (information systems,

logistics, human resources)

Classroom Performance System

Which of the following is not an example of a primary

Operations: The Firm As A Value Chain

Figure 12.4: The Value Chain

Global Expansion, Profitability,

And Profit Growth

International firms can:

expand the market for their domestic product offerings by selling those products in international markets

realize location economies by dispersing individual value creation activities to locations around the globe where they can be performed most efficiently and effectively

realize greater cost economies from experience effects

by serving an expanded global market from a central

location, thereby reducing the costs of value creation

earn a greater return by leveraging any valuable skills

developed in foreign operations and transferring them to

other entities within the firm’s global network of operations

Expanding The Market: Leveraging

Products And Competencies

Firms can increase growth by selling goods or services

developed at home internationally

The success of firms that expand internationally depends

on the goods or services they sell, and on their core

competencies (skills within the firm that competitors cannot

easily match or imitate)

Core competencies enable the firm to reduce the costs of value creation and/or to create perceived value in such a

way that premium pricing is possible

Location Economies

When firms base each value creation activity at that

location where economic, political, and cultural conditions,

including relative factor costs, are most conducive to the

performance of that activity, they realize location

value creation activity in the optimal location for that

activity, wherever in the world that might be)

By achieving location economies, firms can:

lower the costs of value creation and achieve a low cost

position

differentiate their product offering

Location Economies

Firms that take advantage of location economies in

different parts of the world, create a global web of value

creation activities

Under this strategy, different stages of the value chain

are dispersed to those locations around the globe where

perceived value is maximized or where the costs of value

creation are minimized

A caveat:

transportation costs, trade barriers, and political risks

Classroom Performance System

What is created when different stages of a value chain are

dispersed to locations where value added is maximized or

where the costs of value creation are minimized?

a) Experience effects

b) Learning effects

c) Economies of scale

d) A global web

Experience Effects

in production costs that have been observed to occur over

the life of a product

by doing

So, when labor productivity increases, individuals learn

the most efficient ways to perform particular tasks, and

management learns how to manage the new operation

more efficiently

Experience Effects

Figure 12.5: The Experience Curve

Experience Effects

producing a large volume of a product

Sources of economies of scale include:

creating value

plant to serve global markets

Leveraging Subsidiary Skills

It is important for managers to:

recognize that valuable skills that could be applied

elsewhere in the firm can arise anywhere within the firm’s

global network (not just at the corporate center)

establish an incentive system that encourages local

employees to acquire new skills

have a process for identifying when valuable new skills

have been created in a subsidiary

Managers need to keep in mind the complex relationship between profitability and profit growth when making

strategic decisions about pricing

In some cases, it may be worthwhile to price products

low relative to their perceived value in order to gain market

share

Cost Pressures And Pressures

For Local Responsiveness

Firms that compete in the global marketplace typically face two types of competitive pressures:

pressures for cost reductions

pressures to be locally responsive

These pressures place conflicting demands on the firm

Pressures for cost reductions force the firm to lower unit

costs, but pressure for local responsiveness require the

firm to adapt its product to meet local demands in each

market—a strategy that raises costs

Cost Pressures And Pressures

For Local Responsiveness

Figure 12.6: Pressures for Cost Reductions and Local

Responsiveness

Pressures For Cost Reductions

Pressures for cost reductions are greatest:

in industries producing commodity type products that fill

preferences of consumers in different nations are similar if

not identical) where price is the main competitive weapon

when major competitors are based in low cost locations

where there is persistent excess capacity

where consumers are powerful and face low switching

costs

Pressures For Local Responsiveness

Pressures for local responsiveness arise from:

pressures for local responsiveness emerge when consumer tastes and preferences differ significantly between

countries

pressures for local responsiveness emerge when there are differences in infrastructure and/or traditional practices

between countries

Pressures For Local Responsiveness

strategies needs to be responsive to differences in

distribution channels between countries

demands imposed by host country governments may

necessitate a degree of local responsiveness

Classroom Performance System

Which of the following is not a pressure for local

responsiveness?

a) Excess capacity

b) Host government demands

c) Differences in consumer tastes and preferences

d) Differences in distribution channels

The appropriateness of each strategy depends on the

pressures for cost reduction and local responsivness in the industry

Choosing A Strategy

Figure 12.7: Four Basic Strategies

Global Standardization Strategy

increasing profitability and profit growth by reaping the cost reductions that come from economies of scale, learning

effects, and location economies

The strategic goal is to pursue a low-cost strategy on a

global scale

The global standardization strategy makes sense when:

there are strong pressures for cost reductions

demands for local responsiveness are minimal

Localization Strategy

profitability by customizing the firm’s goods or services so

that they provide a good match to tastes and preferences in different national markets

The localization strategy makes sense when:

there are substantial differences across nations with

regard to consumer tastes and preferences

where cost pressures are not too intense

Transnational Strategy

achieve low costs through location economies,

economies of scale, and learning effects

differentiate the product offering across geographic

markets to account for local differences

foster a multidirectional flow of skills between different

subsidiaries in the firm’s global network of operations

The transnational strategy makes sense when:

cost pressures are intense

pressures for local responsiveness are intense

International Strategy

produced for the domestic market and then selling them

internationally with only minimal local customization

The international strategy makes sense when

there are low cost pressures

low pressures for local responsiveness

Classroom Performance System

Which strategy tries to simultaneously achieve low costs

through location economies, economies of scale, and

learning effects, and differentiate the product offering

across geographic markets to account for local differences?

a) Internationalization

b) Localization

c) Global standardization

d) Transnational

The Evolution of Strategy

An international strategy may not be viable in the long

term

To survive, firms may need to shift to a global

standardization strategy or a transnational strategy in

advance of competitors

Similarly, localization may give a firm a competitive edge, but if the firm is simultaneously facing aggressive

competitors, the company will also have to reduce its cost

structures, and the only way to do that may be to shift

toward a transnational strategy

The Evolution of Strategy

Figure 12.8: Changes in Strategy over Time

Classroom Performance System

Which strategy makes sense when pressures are high for

local responsiveness, but low for cost reductions?

a) Global standardization strategy

b) International strategy

c) Transnational strategy

d) Localization strategy